Corporate Sanctions

Daniel J. Grimm*

The history of U.S. economic sanctions is defined by a shift from broad-based restrictions that blanket nations to a precision-driven regime that narrowly directs financial pressure to decision-makers and their interests. This precision revolution has been lauded by the Treasury Department’s Office of Foreign Assets Control (OFAC) as critical to advancing U.S. interests while avoiding the dire humanitarian consequences of comprehensive sanctions

The transition from the metaphorical shotgun to the scalpel has collided with another seismic change in geopolitics: rising corporate influence in global affairs, particularly by digital network providers. The growing role of private power was on full display during the mass corporate exodus from Russia following its invasion of Ukraine in early 2022. These voluntary corporate withdrawals—which this Article calls “corporate sanctions” —can, in combination with OFAC’s targeted sanctions, effectively reinstate the comprehensive sanctions of eras past. Digitalization has amplified the potential consequences, as “de- risking” by digital network providers can erode efforts to counteract harmful cyber operations, oppose the spread of virulent political narratives, and mobilize opposition to hostile regimes.

While de-risking results from a complex array of factors, a legal anachronism bears much responsibility: OFAC’s seldom-used but large-looming authority to charge civil sanctions violations on a strict-liability basis without regard for knowledge or intent. Even as OFAC goes to great lengths to distance practical enforcement decisions from strict liability, the threat of zero-tolerance enforcement is a Sword of Damocles over corporate actors, producing harmful de-risking incentives that can undermine OFAC’s precision revolution as well as broader strategic and humanitarian goals. This Article proposes three solutions: first, abandoning strict liability in sanctions enforcement; second, amending OFAC’s Enforcement Guidelines to treat the provision of digital network technology intended for civilian use the same as humanitarian goods and services when considering enforcement outcomes; and third, publicly disclosing OFAC’s decisions concerning applications for specific licenses.

* Senior Counsel at DV Trading, LLC in Chicago, Illinois. The author previously held several roles at the U.S. Commodity Futures Trading Commission, including Senior Counsel to the Chairman, and was an Adjunct Professor of Law at Georgetown University Law Center. The views expressed in this Article are the author’s own and do not reflect or represent the views or positions of DV Trading or the author’s colleagues. This Article has not been reviewed or approved by DV Trading. The author thanks the editors of the Columbia Journal of Transnational Law for their assistance in preparing this Article for publication.